Everyone this morning, and certainly during the Professionals in Workers' Compensation Conference in Fresno, CA today, will be talking about the abysmal ranking of California in the biennial Oregon survey of premiums and expenses.
California is number one, but that is not a bragging right by most measures, as employers pay the highest premiums in the country and the state is the first to break $3.00 for every $100 of payroll.
The “2014 Oregon Workers’ Compensation Premium Rate Ranking” concludes that California employers pay workers’ compensation premiums of $3.48 for every $100 of payroll, which is 61 cents, or 21.3%, higher than the No. 2 ranking state – Connecticut.
The numbers also mean that premiums are up 56 cents, or 19.2%, from the state’s average premium of $2.92 per $100 of payroll in 2012.
The finger pointing, blaming, and debating is hot - employer advocates are complaining that so far SB 863 has failed to deliver on its cost savings promises; worker advocates are blaming carriers for increasing administrative and adjustment expenses on the backs of workers; the state questions the validity of the study.
Perhaps these viewpoints have validity.
Perhaps none of this really matters.
The byproduct of the Oregon study in California is further discourse and disagreement - in other words disputes - between the primary stakeholders: injured workers, their insured employers (the Oregon study does not take into account self-insured employers) and the state.
Some time ago a new WorkCompCentral employee, after just one week on the job, excitedly told me that he figured out that workers' compensation was a system built on mistrust. No one in the system trusts the other.
The Oregon study, unfortunately, is one of those elements that drives mistrust on a grand scale. But because the Oregon study is the only one of its kind in the nation, and because it has been produced every two years for a long enough time, it has credibility.
Even though the study may reflect only a certain percentage of risk categories most beneficial to Oregon's economic impression, it is (I believe - and correct me if I'm wrong) consistent biennially in study.
|Bowzer says, "get back to work!"|
In other words, the measures and methodologies are the same for each study year. Thus it is an important measure of how one state does from one period to the next.
So while it may not reflect California's economic measures (or any other state for that matter than Oregon) consistency in analysis is important because it is a cerebration of trends.
And here is the relevant trend - California remains among the most expensive states in the nation for employers purchasing workers' compensation insurance as it has since the study was initiated; it has never been ranked lower than 13th, and that was after the benefit gutting SB 899 coincided with a normal hard market cycle in 2008.
It's not that the state's system is so expensive in and of itself - otherwise self-insured employers would be screaming too.
The bottom line is that insurance carriers are charging premiums at these levels because they can. There isn't any magic to the numbers.
Industry observers have been stating for the last couple of years that the market is soft, investment returns are low, and consequently carriers are taking advantage of those conditions to increase pricing.
Remember that the Oregon study doesn't take into account post premium activity, such as discounts, dividends, rebates, etc., all of which are tools in the sales process of insurance companies.
So while it may be alarming in that SB 863 hasn't yet returned much of its promised system savings (if it ever will), this footnote published as part of the study summary is foretelling: "Employers can reduce their workers’ compensation rates through accident prevention, safety training, and by helping injured workers return to work quickly."
In other words, quit whining and get back to work - there are injured workers that need treatment, employers that need safety counseling and claims management assistance, and a state that needs to stay focused on implementation and enforcement of the law.